Consistency defines Skytrax best airlines

The 2017 Skytrax list of the top ten airlines is as in previous years hardly changed of note. Only two airlines dropped out of the list – Turkish Airlines and Qantas, making way for Garuda which was listed in 2015 and 2014, and Hainan Airlines which in 2014 was commended for clean cabins and amenities in business class.

Courtesy Qatar Airways

year’s champion Emirates Airlines went down to fourth place, followed by Cathay in fifth, making way for All Nippon Airways (ANA) in third.

This speaks of the consistency that makes these airlines the travellers’ perennial favourites. SIA has long been reputed for premium service and emulated by the Middle East carriers making them fierce competitors in the field.

However, it is more interesting to look at the movements into and out of the top ten list. Turkish Airlines which was included in the last three years dropped to 12th position this year, and Qantas moved further down from 9th last year to 15th this year. What is most noticeably absent is Asiana Airlines, which was voted the best in 2010 and continued to be one of the best since then until last year when it dropped to 11th and this year ranks 20th. If the Skytrax ranking is anything to go by, then Asiana should be concerned, perhaps not as much about the quality of its service as being surpassed by the competition.

On a more positive note, Hainan Airlines becomes the first China carrier to be ranked in the top ten, and Garuda re-entered the list boosted by its best cabin crew win.

Not surprisingly, the top ten list is dominated by Asian carriers with the exception of Lufthansa. Just a dash shy of that honour and ranked 11th is Thai Airways International.

No US airline has made it to the top ten, and don’t bother asking if they were really concerned,

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Optimism and more good news

IT’s been a long time coming, the optimism and good news that the industry badly misses as more airlines report better, even record, performances as fuel prices show no certainty of bottoming out. From Chicago to London, Singapore and Sydney, the mood is celebratory.

American carriers were the first to celebrate. The US big three– American Airlines, United Airlines and Delta Air Lines – all reported record recovery last year, and are reintroducing snacks on domestic services (instead of lowering the fuel surcharge) as a way of giving back to their customers. (As the price of crude oil plummets, fuel surcharge holds sway, Jan 23 2016)

This article takes a look at four major airlines in three other different regions (Australia, Europe and Asia) that recently posted their report cards, and see how they measure up to the mood.

Courtesy Bloomberg

Courtesy Bloomberg

Qantas

The good run continues with Australian flag carrier Qantas’ record performance for the first half of its current financial year (Jun-Dec 2015). The airline reported an underlying profit before tax of A$921 million (US$685 million), which is A$554 million more than last year’s first half. Revenue was up 5 per cent. Chief executive officer Alan Joyce announced that every part of the Qantas Group contributed strongly to the result, with record profits reported by Qantas Domestic and the Jetstar Group.

Qantas Domestic reported earnings of A$387 million, compared to A$227 million last year, maintaining a strong market share of 80 per cent. The Jetstar Group’s earnings were A$262 million, compared to A$81 million last year. Revenue for the Australian market went up 10 per cent, and for the first time, Jetstar Japan contributed positively to the profit of the Asian network since its start-up in 2012.

Qantas International which used to be the bleeding arm of the Qantas Group reported earnings of A$279 million, compared to $59 million last year. This was its best performance since before the global financial crisis. The airline has benefitted from the weak Australian dollar which has helped boost inbound tourism for Australia. Qantas’ cornerstone alliance partnership with Emirates, American Airlines and China Eastern has strategically strengthened its global network, overcoming an apparent geographical disadvantage of its home base in a far corner of the world.

All this, Mr Joyce would be the first to tell anyone, is not a matter of luck or necessarily a given in today’s more favourable economic climate. He said: “This record result reflects a stronger, leaner, more agile Qantas. Without a focus on revenue, costs and balance sheet strength, today’s result would not have been possible. Both globally and domestically, the aviation industry is intensely competitive. That’s why it’s so important that we maintain our cost discipline, invest to grow revenue, and continue innovating with new ventures and technology.”

Give credit where it’s due. Sceptics may finally admit that Mr Joyce’s “transformation program” is not only bearing fruit but producing a good crop and reshaping Qantas into a more agile and innovative business. “Our transformation program has allowed us to save significant costs,” said Mr Joyce. “It’s never been a simple cost cutting agenda.”

Qantas expects to increase domestic capacity by 2 per cent, international by 9 per cent and Jetstar International by 12 per cent in the second half, averaging 5 per cent for the full year for the Group.

Courtesy Bloomberg

Courtesy Bloomberg

International Airlines Group

At the other end of the Kangaroo route is the unmatched success of the International Airlines Group (IAG) of which British Airways is a partner along with Iberia, Vueling and, more recently, Aer Lingus. IAG’s profits increased by almost 65 per cent to €1.8bn (US$1.98 billion) in 2015, which IAG chief Willie Walsh said had “undoubtedly been a good year”. The Group carried 88.3 million passengers last year, an increase of 14 per cent, overtaking Lufthansa to become second only to Air France-KLM in Europe.

In very much the same way that Mr Joyce was able to turn round the loss-making international division of Qantas, Mr Walsh could pride himself as the man who steered Iberia into profitability following its merger with BA in 2011. The Spanish carrier underwent a painful restructuring but it has paid off. . Unlike Qantas which prefers commercial alliances, IAG adopts a more aggressive strategy of acquisitions. The consortium of BA, Iberia and Aer Lingus stands the Group in good stead to grow trans-Atlantic traffic which forms the largest part of its business.

IAG expects similar growth next year, targeting an operating profit of €3.2bn

Courtesy Airbus

Courtesy Airbus

Singapore Airlines

In Asia
, Singapore Airlines (SIA) Group reported a third quarter (Oct-Dec 2015) profit of S$275 million (US$200 million), 35 per cent higher than that of last year’s third quarter. However Group revenue declined by 4 per cent to S3.9 billion because of lower passenger yields and the continuing lacklustre performance of its cargo operations. Parent airline SIA faces stiff competition from Middle East carriers, and its subsidiaries SilkAir, Scoot and Tigerair are not spared the rivalry from regional budget carriers. Still it is good news that falling oil prices had resulted in a reduction of the fuel costs by S$354 million, a drop of more than 40 per cent.

Characteristically diffident and not as confident as either Qantas or BA, SIA said it expects travel demand to remain volatile, citing the increased competition and the pressure that it will continue to exert on yields and loads. But all three airline groups have experienced increased loads, driven by discounted fares as a result of of intense competition and made possible by the lower fuel costs. According to International Air Transport Association (IATA), breakeven load factors are highest in Europe because of low yields from the open competition and high regulatory costs, yet the region is achieving the second highest load factor after North America and generating solid growth.

It is going to be a rosier 2016. IATA forecast air travel to grow 6.9 per cent, the best since 2010 and well above the 5.5 per cent of the past 20 years. Demand is fueled by stronger economic growth and made attractive by lower fares. It is unlikely that the oil price will rise and airlines may even expect smaller fuel bills, making up 20 per cent of an airline’s total operating costs compared to what it used to be at 40 per cent. This will be further enhanced by the acquisition of new aircraft that are more fuel efficient.

In this connection, SIA has something to crow about as it took delivery last week of the first of 63 Airbus A350 firm orders after a long wait of 10 years. The first tranche of ten aircraft which it hopes to take complete delivery by the end of the year have a seat configuration of 42 business, 24 premium economy and 187 economy. An ultra-long range version of the model will be used to resume SIA’s non-stop services from Singapore to Los Angeles and New York in 2017. The modified A350 is said to be more fuel efficient than the A340 previously used. It will be configured premium-bias.

SIA chief executive officer Goh Choon Phong said: “The A350 will be a game-changer for us, allowing for flights to more long-haul destinations on a non-stop basis, which will help us boost our network competitiveness and further develop the important Singapore hub.”

Opinions are divided as to whether SIA has moved a little too slowly and as a result is playing catch up when once it used to lead the field. By all indications of the good times finally rolling back for the industry, it is not too late to leapfrog the competition to make up for lost time. SIA is banking on the rejuvenation of the demand for premium travel, the product it has always been reputed for.

The IATA forecast points to weak markets in South America and Africa – two regions that are of little interest to SIA – but continuing robust growth for North America which has been a key market for SIA since it commenced operations thereBut the competition will be tough, particularly from Middle East carriers tapping traffic in Asia-Pacific and redirecting it through their Gulf hubs. Already United Airlines has announced its launch of a non-stop flight between San Francisco and Singapore in June this year, ahead of SIA. (United Airliens steals a march on Singapore Airlines, Feb 15 2016)

According to IATA, consumers will see a substantial increase in the value they derive from air transport this year. Indeed, air travellers will benefit from the optimism as airlines become more inclined to improve their product, and the increased competition will likely see the airlines introducing more creature comforts beyond the snacks and peanuts. Qantas for one is upgrading its airport lounge at London Heathrow as part of a program to create a flagship global lounge at important destinations started three years ago. Hong Kong, Singapore and Los Angeles are already enjoying the new facility. Qantas is also developing across its domestic network an industry-leading wi-fi service that has the ability to deliver the same speeds in flight that people expect on the ground.

Mr Joyce said: “Our record performance is the platform to keep investing in the experiences that matter to our customers and take Qantas’ service to new levels.”

Courtesy Airbus

Courtesy Airbus

Thai Airways International

Positive signs of the times are best presented by the performance of Thai Airways which posted a quarterly profit of 5.1 billion (US$141.7 million) baht ending Dec 31, 2015 reversing a loss-making trend. This compared to a 6.4 billion baht a year ago, and softened the full year’s loss to 13.05 billion baht, 16 per cent lower than 15.57 billion baht last year, partly attributed to a decrease in fuel costs of 20 per cent. The airline introduced a program “to stop the bleeding” last year aimed at introducing cost-saving measures, cutting unprofitable routes and down-sizing the fleet.

Plagued by political problems at home and safety concerns based on the findings of the International Civil Aviation Organization (ICAO), Thai Airways has been struggling to stay afloat amidst increased competition from regional carriers. It is to be expected that stronger-muscled airlines such as Qantas, British Airways and SIA are likely to rise faster with improved economic conditions, but when things are beginning to look up for the more troubled carriers while noting that in good times as in bad the fortunes of various airlines can be widely diverse, the industry can at last be a little more confidently optimistic.

Making sense of flying the world’s longest flight

Courtesy Singapore Airlines

Courtesy Singapore Airlines


ONCE upon a time, the honour of flying the world’s longest nonstop commercial flight belonged to Singapore Airlines (SIA). That was in June 2004 when SIA launched its non-stop service from Singapore to New York (Newark), a journey of 19 hours on the Airbus A340-500 jet covering a distance of 9,535 miles. SIA had earlier in February of the same year inaugurated a non-stop service to Los Angeles, flying 8,770 miles in 18 hours.

Both services had been terminated by SIA, to Los Angeles in October 2013 and to New York a month later. Looking back, SIA chief executive officer Goh Choon Phong cited the unsuitability of equipment for such a long flight that contributed to the unprofitability of both routes and their eventual discontinuation. He said: “There isn’t really a commercially viable aircraft that could fly nonstop.” The airline is said to be talking with Airbus Group SE and Boeing Co. on developing a plane with new technology that would make flying non-stop to the US profitable. In Mr Goh’s words, “We, of course, want it as soon as possible.”

With SIA out of the race, the world’s longest flight today is operated by Australian flag carrier Qantas, from Dallas-Fort Worth in the US to Sydney in Australia over a distance of 8,578 miles and taking up to 17 hours. But that record will soon be broken when Emirates Airlines mounts a service from Dubai to Panama City, Panama in February next year. The journey of 8,588 miles will take 17 hours and 35 minutes. And yet again the title will pass on to another carrier when Air India flies from Bangalore in India to San Francisco as planned, a distance of 8,701 miles that would take up to 18 hours of flight time.

Courtesy Airbus

Courtesy Airbus

Surely there is more to the business of flying such a long route than the media hype that comes with it. In truth a flight of more than 15 hours is hardly an exception. Middle East carriers are aggressively connecting US destinations directly with their home bases. Emirates is already operating from Dubai to San Francisco, Los Angeles and Houston. Etihad Airways flies from Abu Dhabi to Los Angeles, San Francisco and Dallas Fort Worth. Saudi Arabian Airlines has a service from Jeddah to Los Angeles. Qatar Airways operates from Doha to Houston and Dallas Fort Worth.

Courtesy Qantas

Courtesy Qantas

Besides Dallas Fort Worth, Qantas also operates from Melbourne to Los Angeles. Air India already flies from Mumbai to New York (Newark). American carriers are not left out of the game. Delta Air Lines operates from Atlanta to Johannesburg. American Airlines has a service from Dallas Fort Worth to Hong Kong. United Airlines also has a non-stop service to Hong Kong from New York (Newark) and from Chicago, and to Mumbai from New York (Newark) as well as to Melbourne from Dallas Fort Worth.

Other carriers that operate similarly long routes nonstop include Cathay Pacific (from Hong Kong to New York, Boston, Chicago in US and Toronto in Canada); China Southern Airlines (from Guangzhou to New York), EVA Air (from Taipei to Houston and New York), South African Airways (from Johannesburg to New York), and Air Canada (from Toronto to Hong Kong).

It is clear that the operations of such a flight have in the past been hampered by the limitations of an aircraft’s range. With advanced technology, gone are the days of the milk run of an airline hopping from port to port, making the n3ecessary technical stops, to reach its final destination. Take, for example, an airline such as SIA flying from Singapore to London in the 70s stopping en route at Bangkok or Mumbai, then Bahrain, and then Rome and Amsterdam to drop but not pick up passengers. The flying time (including time spent in transit) has been cut down drastically today for a non-stop between Singapore and London, taking only 13 hours.

Additionally what has opened the windows for long distance non-stop flights is the onset of a more liberal open skies aviation policy adopted by like-minded nations around the world. A major problem facing many airlines that are operating services over a long distance with stopovers is the hurdle of the absence of fifth freedom rights. SIA’s Goh recognised this in the case of SIA. He said, with specific reference to SIA’s interest in the US: “There is a lack of viable intermediate points. That’s largely because the countries concerned are not really giving us the rights to operate what we call the fifth freedom from those points to the U.S.” This may be pushing SIA to consider not only putting back its nonstop services to New York and Los Angeles but also adding other points. SIA’s withdrawal is largely seen to have benefitted rival Cathay Pacific which introduced a nonstop service between Hong Kong and New York on the heels of SIA’s termination of its service between Singapore and New York.

Ultimately it is all about filling up the plane. Nonstop services thrive on demand for seats point to point. In an earlier piece that I wrote, a reader commented on how American carriers are losing out by not operating nonstop services from the US to Singapore. The same “how” question may be asked of them as of SIA: Is there enough traffic to justify SIA’s nonstop services to the US? Presently SIA operates from Singapore to New York via Frankfurt, and to San Francisco or Los Angeles via Hong Kong, Taipei, Seoul and Tokyo. Its services are popular in the markets of the intermediate points. Yet it would be presumptuous to think that Singapore’s lack of a hinterland market, compared to, say, Hong Kong situated at the doorstep of the huge China mainland, may not do as well for a nonstop service to the US. The market is as wide as how you define it and make it work. Clever and effective marketing supported by an excellent product and a strong network of connectivity entailing growing partnerships with other airlines can overcome germane geographical issues, the reason why SIA flights to North America continue to be popular among Indian travellers even if they had to connect at Singapore with a layover, the way that the numbers are also increasing in competition on Cathay Pacific connections out of Hong Kong.

But the aviation landscape is constantly shifting and changing. Timing is everything but can also surprise. Emirates’ planned flight to Panama City is premised on what it noted of the Latin American city’s advantageous location, burgeoning business environment and gateway for tourism. Similarly, Singapore too is noted for its strategic geographical location as a gateway to Southeast Asia and beyond, and as a centre for global business, the way that Dubai too has grown in geographical importance as a gateway to not just the Middle East but also the rest of Africa and Europe. There is a hint of the early bird advantage in Emirates’ strategy. The Middle East carrier has so far been quite successful expanding its network across the globe, and its penetration into the US territory has recently caused the big three of American carriers (United, American and Delta) to cry foul alluding to an unfair advantage it enjoyed from state subsidies.

So too would SIA have enjoyed that early bird advantage when it launched its nonstop services to Los Angeles and New York, and becoming the first legacy airline to operate an all-business class service, which indicates the market segment that SIA was after. In fact, SIA was not the only Southeast Asian carrier to operate nonstop to the US. Thai Airways International introduced nonstop services to New York and Los Angeles in 2005. The New York run was short lived, ending in 2008. The nonstop Los Angeles service followed much late in 2012. The spiralling cost of fuel was cited as a reason.

Courtesy AP

Courtesy AP

But for Air India, there could not a better time than now in the context of the low fuel price that airlines are enjoying. The carrier’s planned service from Bangalore to San Francisco is a dream stolen from erstwhile Indian competitor Kingfisher Airlines which went under a heap of debts before it could realise its ambition. The new link appears to be a logical move particularly when there is a significant Indian population in Silicon Valley and there is increasing demand for travel between the two cities which are cyber hubs on opposite sides of the world. Besides, India has a large population base to justify more nonstop flights, unlike Singapore but like China, which has seen more nonstop flights from China to countries like Australia. Air India’s first challenge would be to attract Indian passengers back to flying with them non-stop where the options are available instead of connecting on other carriers. The record for flying the world’s longest flight is good only when the plane has the load to make it profitable.

This article (alternatively titled “Making sense of ultra long-haul flights” was first published in Aspire Aviation.

Competing to be the best: How reliable are survey readings?

Courtesy Cathay Pacific

Courtesy Cathay Pacific


SKYTRAX has named Cathay Pacific as the world’s best airline in 2014, displacing last year’s winner, Emirates. In second and third place are Qatar Airways and Singapore Airlines (SIA) respectively. Asian and Middle East carriers dominated the ranks of the top ten: Emirates (4th), Turkish Airlines (5th), All Nippon Airways (6th), Garuda Indonesia (7th), Asiana Airlines (8th), Etihad Airways (9th) and Lufthansa (10th). No American carrier was placed.

Are those really the world’s best airlines?

The winning airlines are unlikely to question the validity of any survey, as you can see how many of them are listing awards from all and sundry like a laundry list as endorsement of their good reputation. The corollary must be that if you accept the accolade willy nilly, so must you recognize one and all sideswipes.

Which leads to the next question: Is Skytrax the standard?

Skytrax claims its World Airline Awards to be “the global benchmarks of airline excellence”. The winners are decided by 18.85 million travellers from over 160 countries, and that should take care of any misgiving about the survey having an inadequate population and most importantly, the bias factor or its susceptibility to political influence.

Cathay CEO Ivan Chiu said: “The World’s Best Airline award is particularly important to us because it was decided by the votes of close to 19 million travellers from around the world.” Cathay was placed sixth last year and has won the award four times, previously in 2003, 2005 and 2009.

Emirates president Tim Clark said: “These awards are widely regarded as the industry’s benchmark for excellence. To be voted ‘World’s Best Airline’ by millions of discerning travellers is something… to be proud of.”

Qatar CEO Akbar Al Baker said: “These awards are highly rewarding as they are judiciously voted by passengers a true account of the overall experience felt by customers who have travelled with the airline.” Qatar won in 2011 and 2012.

Courtesy Etihad Airways

Courtesy Etihad Airways


However, Etihad’s withdrawal from participation apparently over differences in the methodology may tell a different story. Although it had never won, Etihad was consistently placed in the top ten in the past five years, ahead of Emirates in some years. Despite its withdrawal, Etihad was still ranked in this year’s survey because according to Skytrax, “an airline cannot be withdrawn from the World Airline Awards since these results are directly decided by customers.” That statement should add to the survey’s credibility, yet without taking sides and arguing the toss about fairness, one can only suspect and understand that the subjective nature of the survey (and of any survey) is naturally exposed to dissatisfaction, whether baseless or with reasons which may well be valid, the way that the Oscars results do not sit as squarely with a lot of people. Now and then you get an outstanding actor declaring his or her disinterest in the awards.

The issue is usually one of weightage and relevance of selection. However designed, the respondents may to some degree be steered by what is being asked. Take, as matter of curiosity, the 2014 Skytrax survey readings for the top ten. SIA is ranked ahead of Cathay for inflight entertainment, cabin cleanliness, First Class amenities, First Class cabin overall, seats in First, Business and Economy, and First Class meals; but close behind Cathay in other areas except for its noted absence for airport services, Business Class amenities and Business Class meals. Yet Cathay takes the cake.

It is encouraging to see breakthroughs by airlines such as Turkish and Garuda in a game dominated by the familiar big names. Interestingly, Turkish ranks above everyone else except Emirates and SIA for inflight entertainment. It is no surprise that Garuda tops for cabin crew, the epitome of Asian service culture, in a category swept by Qatar (6th) and nine other Asian carriers: Cathay (2nd), SIA (3rd), Asiana (4th), Malaysia Airlines (5th), EVA Air (7th), ANA (8th), Thai Airways (9th) and Hainan Airlines (10th). In like fashion, with the exception of KLM (8th) and Qantas (9th), the airport services category belonged to Asian carriers: ANA (1st), EVA (2nd), Thai (3rd), Asiana (4th), Cathay (5th), Korean Air (6th), Garuda (7th) and Dragonair (10th).

Yet, giving credit where it is due, one may question the appropriateness of comparing a carrier having limited global presence with others that are more exposed in the global arena, and how a population of largely local respondents compares with the wider global population. Hence it may be more meaningful to look at niche rankings, but we all love the sweeping titles of the best overall, don’t we? Even regionalized readings must be viewed in their proper context. The Qantas Group went ga-ga over Jetstar Airways’ win as best low-cost airlines in Australia/Pacific over AirAsia X (2nd), Scoot (3rd) and Tiger Airways (4th), but the world’s best is AirAsia followed by AirAsia X in second place ahead of Jetstar Airways (4th). Note how the preferences change when the population mix changes.

Who then really is the best overall? It may be difficult to say for sure one definite airline, and under the circumstances a wider reading of the top three or five or up to ten may be a more sensible assessment. The contest is to get into that magic circle of the elite.

Courtesy TODAY

Courtesy TODAY


Equally significant is the consistency over time. Airlines such as Cathay, Emirates, Qatar and SIA may pat themselves on the back for being there long enough to deserve their stripes. Narrow that down further, and you will see that only two airlines – Qatar and SIA – have been consistently placed in the top three in the past five years. Asiana had a good run from 2010 to 2012. Cathay was just outside in 4th place until it tumbled to 6th last year and bounced back to be this year’s winner. The wider reading should lead some airlines such as Qantas to ask why it has dropped out of the respectable club.

One survey alone cannot be definitive, hence winning across notable surveys may strengthen the reading. Compare the Skytrax results with Conde Nast Traveler’s assessment by its readers – based on the same principle of uninfluenced feedback – and you will begin to understand why. In its ranking for foreign carriers (outside America), Etihad is placed 4th behind Emirates (2nd) and ahead of Qatar (7th). Cathay is 7th, and the winner is SIA. Korean Air (8th) did better than rival Asiana (18th), and so did Japan Airlines (16th) over ANA (21st). The Conde Nast top ten includes Virgin Atlantic (3rd), Air New Zealand (5th) and Swiss International (10th).

Then there is the annual Airline of the Year award given by the Air Transport World (ATW) magazine. The criteria take into consideration financial performance (which debunks the myth that the world’s favourite airline is not necessarily the most profitable or even profitable) and visible leaps forward in services. However, naming only one winner can often lead to suspicions of political influence (the way that some beauty pageants are said to be when a winner is crowned) and the tendency to pass the honour around although airlines such as ANA (2007 and 2013) and Air New Zealand (2010 and 2012) had been named twice. Cathay (2006), SIA (2008) and Asiana (2009) had all had their turns. Delta Air Lines is ATW’s Airline of the Year 2014.

Several other magazines also dish out their own annual awards, which may be based on their readers’ feedback, or assessed by a panel of judges or arrived at combining the two methods. Some of them target niche markets such as awards that recognize the best airline for business travel. That in a way avoids spillover or halo effects and sectarian prejudices as, for example, an airline that impresses in First and Business Class may pay scant attention to what happens in Economy.

Nevertheless, surveys are useful tools in maintaining competition. Everyone loves to win, unless you do not give a hoot about how the world sees it and how that may affect your bottom line. So too, everybody loves a winner; but that is no guarantee that the traveller will necessarily fly with the named best airline. Without downplaying their influence on the market, such awards probably mean more to the airlines than the travellers.

This article was first published in Aspire Aviation.

Air India joins Star Alliance: How will it benefit?

Logo_Star_AllianceNO more pussy-footing. Air India becomes a member of Star Alliance from July 11, 2014, joining a global network of 26 airlines that include founders Air Canada, Lufthansa, Scandinavian Airlines, Thai Airways International and Untied Airlines. Other airlines that have since joined the alliance include Air China, Air New Zealand, All Nippon Airlines, Asiana Airlines, Singapore Airlines and South African Airways.

Welcoming the Indian flag carrier to the club, Star Alliance COO Jeffrey Goh said Air India would enjoy “Alliance’s benefits” while other member airlines would benefit from “improved access to a region which includes the world’s fifth largest domestic aviation market.”

Courtesy Star Alliance

Courtesy Star Alliance


At the same time, an elated Air India chairman and managing director Rohit Nandan said: “We eagerly look forward to extending the benefits and privileges of Star Alliance to (our) passengers.” The benefits are assumed, often touted from the perspective of the air traveller with “connectivity” and “seamless travel” listed at the top of the list. Air India’s admission to the club can only mean more flights and more destinations added to the alliance’s network, which will boosted by an additional 400 daily flights and 35 new destinations in India.

Yes, indeed, it is only to be expected that membership must come with benefits. What does Air India – as an airline – hope to gain from the induction?

If it works good for the passengers, it should work well for the airlines. That, after all, is the encapsulation of the alliance’s goal to grow the market share collectively in a way that individual members may not be able to do as effectively and as efficiently because of costs and the limitations of market access. Member airlines are increasingly moving towards more code share flights, shared facilities such as airport lounges and even pooled management at some ports. The launch of a dedicated Star Alliance terminal at London’s Heathrow Airport will strengthen the cooperation among member airlines and enhance the connectivity between them. Alliances (including OneWorld and SkyTeam) will have to introduce more of such initiatives to convert doubters like Virgin Atlantic chief Richard Branson; except for the scale, membership otherwise is not much difference as commercial tie-ups between individual airlines that may even benefit from the flexibility of cross-alliance arrangements. However, airlines such as resource-rich Emirates which are single-handedly successful thus far may not be as easily convinced. Suffice that it be suggested that Air India is not quite Emirates.

On the home front, India is currently being served by 13 Star Alliance members flying to 10 destinations, making up a total of 13% market share. It is expected that with Air India, the market share of the alliance will increase to 30%. However, is the alliance benefiting at Air India’s expense? The inducement for Air India must be the international market which will increase to 28% for Star Alliance. Through the alliance, Air India will be able to serve more than 10 destinations additionally in China, Africa and Europe over and above its own 33 international destinations. Since its main focus is the Middle East, through the alliance, Air India may be able to check the competition posed by the big three Middle east carriers of Emirates Airlines, Etihad Airways and Qatar Airways. Interestingly, Air India’s seat share is only 18% compared to Emirates’ 20% between India and the Middle East.

In the same way that Emirates (although not a OneWorld member) has increased Qantas’ access to more destinations in the Middle East besides Europe and Africa, Air India could latch on to Star Alliance partners such as Turkish Airlines for the same extension. In fact, some observers have primed Turkey’s TAV Istanbul Ataturk Airport as a veritable competitor that may one day usurp the hub status of Dubai. In that connection, Turkish Airlines will also grow in importance.

Yet another school opines that India has that same hub potential to connect Asia and Australiasia with Europe and Africa and beyond. Mumbai could be a convenient one-stop between Sydney and London with feeds to the region. Access by Star Alliance members to India’s domestic market and the improved standing of Air India in the global market will, as Indian Prime Minister Narendra Modi hoped, revive economic growth in India under his leadership.

So much has already been said about India’s potential with a population of 1.2 billion for both domestic and international traffic. That almost suggests an imbalance in the equation in favour of Star Alliance members outside India waiting to tap into that potential. But granted that the benefits are mutual as they are supposed to be, it cannot be denied that there remains still a lot of intra-competition. Yes, membership has its benefits, but Air India cannot be blind to the competition. If it is not about the greater good, it has to be about the lesser evil.

This article was first published in Aspire Aviation.

SIA Cargo stops shark’s fins carriage: About time

sharkfinSINGAPORE AIRLINES (SIA) Cargo should be congratulated for its decision to stop carriage of shark’s fins. This is a significant move considering that Singapore is a trading hub for the product which is a delicacy much sought after in the region.

Cathay Pacific was the first airline to ban carriage of shark’s fins in 2012. Other airlines that include Korean Air, Asiana Airlines, Qantas and Air New Zealand have already followed suit. SIA’s move could have come earlier, but as it has often been said, better today than tomorrow, better late than never.

A report by local press Today (Jn 30, 2014) suggested that SIA yielded to pressure by animal welfare groups. An online petition calling for SIA to cease carrying shark’s fins launched last year attracted more than 45,000 signatures. Another campaign initiated via Facebook by WildLifeRisk called on activists to conglomerate at SIA check-in counters in Manila, Sydney, Kuala Lumpur, Hong Kong and Los Angeles on August 10 to protest against the airline’s erstwhile policy. Fortunately for SIA, its “no shark’s fins” takes effect on August 1.

WildLifeRisk’s next target: Thai Airways International.

Dark clouds over Asia-Pacific

THERE has not been much good news lately in Asia Pacific aviation. This is worthy of note, not that airlines in other parts of the world are faring better – far from it – but that this region, in particular Asia, in these challenging times has been touted as the only region expected to be showing any growth.

Air Australia went bust. It is not the first nor will it be the last to bite the dust in light of rising fuel costs against the backdrop of a sluggish global economy. The Australian carrier’s demise raises the question as to whether there is room for such a supposedly boutique airline that grew from the charter business, relying heavily on government contracts, to expand into the wider and more competitive commercial arena of the more established carriers.

The future of India’s Kingfisher Airlines is hanging in the balance as it posted deeper losses – R4.44 billion in the last Oct-Dec quarter compared to R2.54 billion in the previous year, plunging 75%. The airline has never made a profit since it was launched in 2008. In a statement that it issued, Kingfisher said: “Steep depreciation of the Indian rupee coupled with consistently high crude oil prices has led to a challenging quarter for the Indian aviation industry.” Its fuel costs had risen by 37% to R1.9 billion. The company has already wounded up its budget arm.

Tiger Airways reported a net loss of S$17 million for 3QFY11/12 (Oct-Dec) compared to a profit of S$22.5 million in 3QFY10/11. Both Tiger Australia and Tiger Singapore were in the red. Latest data for Jan 2012 showed a fall in the number of passengers flown by 16% to 466,000 against seat capacity of 621,000 – giving a load factor of 75% compared to 83% in Dec 2011. High fuel costs and fleet under-utilisation were cited as the culprits.

Malaysia budget carrier AirAsia reported a 56% decline in Q4 (Oct-Dec) profit from M$311.1 million a year ago to M$135.7 million. However, full-year result showed increased operating profit by 12% to M$1.2 billion compared to M$1.0 billion the previous year. This was achieved despite a 36% increase in fuel costs. The airline had earlier announced it was terminating flights to Europe and India because of high fuel process and weak demand.

Performance for AirAsia’s 49% stakes in both AirAsia Thailand and AirAsia Indonesia was not encouraging. Although both carriers reported growth in revenue, AirAsia Thailand posted a profit of Bt2.04 million against Bt2.01 the year before, and that for AirAsia Indonesia dropped 53% to Rp150 billion from Rp312 billion. Two new joint-ventures – AirAsia Japan (in which AirAsia has a 49% stake) and AirAsia Philippines (40% stake) have been added to its stable this year.

It is not just the smaller airlines that are feeling the pinch, but the big guys too. Qantas posted a 52 per cent drop in first half profits before tax from A$417 million to A$202 million. Earnings for the airline plunged from A$165 million to A$66 million, down 60%. This was attributed largely to the cost of industrial action amounting to A$194 million and increased fuel costs that jumped 26% or A$444 million to A$2.2 billion.

Singapore Airlines (SIA) too reported that fuel prices had adversely affected its performance as net profit for 3QFY11/12 fell 64% from S$378 million to S$137m. Expenditure on fuel – which accounted for 40% of expenditure – went up by US$386 million or 33%. All three wholly-owned subsidiaries also recorded fall in operating profit: SIA Engineering, S$28 million down from S$34 million; SilkAir, S$32 million, down from S$45 million; and SIA Cargo, S$40 million from S$48 million. Looking ahead, SIA expects passenger yields to remain under pressure while cargo yields will continue to decline.

Thai Airways International posted a net loss of Bt10.2 billion for the year ending Dec 31, down from Bt14.7 billion the year before. Again, this was attributed largely to a 38.7% increase in jet fuel prices.

In announcing the results for Qantas, chief executive Alan Joyce said: “The highly competitive markets and tough global economy in which we operate mean that we must change.” For Qantas, it means cutting jobs and unprofitable routes – the most likely route that most other airlines would similarly adopt. An added strategy is to grow budget subsidiary Jetstar, which achieved record EBIT of A$147 million, up A$4 million and focus more on the Asian market with the setting up of two new subsidiaries – a joint-venture with Japan Airlines and Mitsubishi Corporation and a regional all-Asia premium carrier.

SIA is also well supported by SilkAir, Tiger Airways (for which it has a 32.8% stake) and a new budget arm – Scoot – to be launched in July, operating regional long haul to destinations in Australia and China. In a climate of uncertain trends, it is a catch-all strategy.

Loss-making Malaysia Airlines is probably working on a similar strategy, announcing its intention to cooperate with compatriot AirAsia to divide the market between them, with Malaysia Airlines focussing on the long-haul full-service, AirAsia on budget and the likelihood of a regional premium airline in the fashion of Qantas amidst growing speculation that it could be a three-way partnership which, if it materializes, will base the new carrier in Kuala Lumpur.

While some airlines such as SIA, Thai and Hainan Airlines have reported improved traffic in January this year (and all eyes are now turned to Cathay’s impending result announcement in mid-March), dark clouds still loom large overhead considering the debt crisis that Europe continues to face and the escalating fuel price especially now that Iran has curbed its export to the European Union and the likelihood of its extension to other political foes. This is apt to squeeze the low-cost operators more than their bigger competitors, considering that fuel expenses make up a higher proportion of the former’s total operating costs. Full-service airlines may be able to cushion the impact by new rounds of fuel surcharge hikes, something that budget carriers are less likely to afford doing without losing market share.

The higher fare as a consequence of higher fuel costs may reduce the demand for leisure travel, which is likely to affect more the budget carriers that operate to vacation destinations (as in the case of Air Australia), whereas business travel is largely price inelastic. Several full-service airlines which thrive on the high yield of the premium market are hopeful of its recovery. The market has strengthened towards the end of 2011, contributing to a full-year growth of 5.5%. While mindful of the risks posed by the Eurozone crisis, the International Air Transport Association (IATA) is expecting some increase in business travel, lending some support to premium travel, in the months ahead. One cannot be too sure too if this lends enough credence to HongKong Airlines’ optimism to launch all-business class flights between Hong Kong and London.

What is happening in Asia-Pacific may be reflected in the strategy of an airline outside the region, namely Swiss International Air Lines – the successor of once the world’s most reputed airline, Swissair, that went bust in 2001. The resurrected Swiss airline has identified business class as its main focus in the competition, and its catchment has to extend beyond Switzerland.

It has also identified Middle East carriers such as Emirates as the “real” competitors, which are threatening to shift intercontinental hubs to where they are based – clearly the same threat that Qantas is facing on the kangaroo route as these carriers are offering strong connection alternatives, and a similar concern for SIA that an airport like Dubai is diverting hub traffic away from Singapore Changi Airport.

Swiss International chief commercial officer Holger Hatty opined that budget and network carriers would become increasingly similar in the short and medium haul business, and that the main battleground for competition is shifting to the long-haul trunk routes. Are the days of unprecedented growth for short-haul budget carriers over, which explains how some of them are already looking beyond the 4-hour flight-time limitation of the conventional budget model?

As for the long haul, Swiss International believes it has the right ingredients, where it can compete on product quality providing such creature comforts as air-cushioned seats and freshly-made food in first and business class, and on personalized customer service with some “intimacy”. That should be good news for airlines such as SIA and Cathay Pacific, and perhaps Qantas as it restructures its international arm.

Currency conversion
US$1 = A$0.93 = R48.98 (Indian rupee) = S$1.25 = M$3.02 (Malaysian ringgit) = Bt30.32 (Thai Baht) = Rp9,046 (Indonesian rupiah)